According to McKinsey the CDR market could be estimated to be a total of $1.2 trillion by 2050. The market is currently at its nascent stage, having just crossed a milestone of 2,000 transactions, with 9.1 million credits purchased.
CDR is a deeptech market, meaning that fully fledged products require years of high end R&D to form. Due to these technological barriers, patents are of paramount importance in the market, as a proxy signal for technological readiness.
On average, CDR project developers with patents have received 3x venture capital funding compared to their patent-less peers, and 43% of the engineered CDR developers that have offtake agreements have patents.
AlliedOffsets underwent desk research and found that there are 437 patents owned by 88 CDR companies excluding carbon utilisation (UTL) companies using carbon for strengthening concrete or creating sustainable aviation fuels and industrial carbon capture (CC) companies.
These innovators gain first mover advantage through pioneering the exploration of the slopes of the technological cost curve where they are steepest. Their strategy is to map the technological frontier quickly during market infancy and patent their findings to hopefully gain dividends in commercial protection and licensing ability of their technology as the market grows and potentially grab large shares of the next trillion dollar market.
AlliedOffsets tracks patents awarded to CDR firms in our database; we recently refreshed the patent holdings companies in our database, and wanted to conduct a brief analysis of how the patent landscape looks today, in the industry’s embryonic stages. Read on to find out our results!
Excluding CC and UTL, there are 77 companies within the CDR market that have raised venture capital funding, with 39% of them having 1 patent or more. There has been a total of $2.7 billion invested into these technologies but there is a stark difference in the amount raised by those with patents and those without. In total, CDR companies that have patents have raised $1.55 billion compared to $0.9 billion invested into non-patent holding companies. This accounts for 72% more money in total raised by companies that have patents.
In fact, this is likely to be an underrepresentation because six companies, including Carbon Engineering (a large patent holding DAC company), have undefined amounts invested into them. This suggests that the impact of having a patent on fundraising is much larger than what we see in the numbers.
Accounting for the large sway in the funding distribution large DAC companies have such as Climeworks and 1PointFive raising $650 million and $550 million each, we found that the median multiplier difference in funding between companies with patents compared to companies that do not have patents is 3x.
Out of all 567 project developers in our database (excluding CC and UTL), 88 have at least a single patent under their company. The graph below depicts the spread of patents to methodologies and contrasts that number with the number of companies that have patents within that methodology.
DAC as expected has the most with 171 patents to 32 companies. Three large firms, Climeworks, Global Thermostat, and Carbon Engineering, are leading in this regard each with 34, 24, and 19 patents respectively. This means they own 45% of all patents awarded to DAC firms.
The largest median number of patents per company is BECCS with 5 patents. The majority of patents are owned by Clean Energy Systems, a company with a history of ex-aerospace engineers that filed 24 patents pertaining to biomass fuel generators from 1998-2010. This is interesting as Orsted and Drax, which have the largest offtake agreements contributing to the market, only have 6 and 4 patents, respectively. This helps to show the difference between infrastructure and technology when scaling different types of methodologies, comparing DAC and BECCS.
Biochar company Ensyn is primarily focused on creating biocrude. It does, however, have a separate revenue stream whereby it puts biochar in concrete to strengthen it and effectively stores that carbon away. This helps to explain the numerous pyrolysis patents that they hold as their original business model was for biocrude.
OCN, BLU, BIO, MIN and AFOLU all have expected numbers of patents per leading patenting company.
Two thirds of all CDR patents have been published in the last 3 years, which has been dominated by mainly DAC patents and some ERW patents. As this blog is being published in April, there have already been 76 patents published in 2024 – already three quarters of the patents published the year before.. At this rate, we can expect around 150 patents to be published by the end of the year.
The explosion of DAC patent filings could be attributed to the start of the XPrize Carbon Removal Challenge in 2021: the challenge encouraged over 1,000 teams to create carbon removal technologies. The the Inflation Reduction Act in the USA giving $180/tCO2 subsidy in the US for DAC sequestration coming online in 2022 also encouraged more actors to enter the market.
Out of the 88 companies that have patents, the majority of HQs are from countries that have a strong history of R&D, as well as a stated interest in CDR: USA, Canada, Switzerland, and UK. It is interesting to note that when it comes to where the patents are being filed, the majority are in the US, with 43.9%.
In summary, the carbon dioxide removal (CDR) market is rapidly evolving, with a projected value of $1.2 trillion by 2050 and significant investment flowing into companies with patented technologies. Patents are crucial indicators of technological readiness and are influencing investment decisions, with patent-holding CDR companies raising 72% more funding on average than those without patents. DAC leads in patents, with key players like Climeworks and Carbon Engineering dominating this space.
Over two-thirds of CDR patents have been published in the last three years, particularly driven by DAC innovations spurred by initiatives like the XPrize Carbon Removal Challenge and policy incentives such as America’s Inflation Reduction Act.
Geographically, patent holders' activity is concentrated in countries like the USA, Canada, Switzerland, and the UK, underscoring the importance of strong R&D in these regions. This data underscores the critical role of patents in shaping the landscape of CDR technologies and investment dynamics as the market matures.
If you are interested in keeping on top of the CDR market, reach out to AlliedOffsets!
If you’re a client, you can view the CDR patent analysis in our dashboard.